BILL ANALYSIS
SENATE JUDICIARY COMMITTEE A
Charles M. Calderon, Chairman B
1995-96 Regular Session
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AB 1770
Assemblymember Brewer
As amended on January 31, 1996
Hearing Date: February 6, 1996
Public Utilities Code
GEH:cb
UTILITY SERVICES
LANDLORD AND TENANT
HISTORY
Source: California Apartment Association
Related Pending Legislation: AB 318 (Katz)
Prior Votes: Not relevant.
SPECIAL NOTE:
This bill has been amended recently to remove all of its
prior provisions and to replace them with the provisions of
last year's AB 1785 (Brewer). AB 1785 was vetoed by the
governor at the author's request because the author
discovered after the legislative session had ended that a
typographical error ("for" instead of "or") changed the
intended meaning of the bill. AB 1785 was the subject of
two lengthy hearings in this committee last year, and it
passed 6 to 1 after being substantially amended by the
committee. This bill, as amended, is identical to AB 1785
as it left this committee last year, except for the
deletion of the typographical error and the addition of an
urgency clause.
KEY ISSUES
1. SHOULD MUNICIPAL UTILITIES BE PROHIBITED FROM CHARGING
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Page 2
subsequent tenants or landlords for a bill incurred,
but not paid, by a previous tenant?
2. SHOULD MUNICIPAL UTILITIES BE REQUIRED TO OBTAIN THE
CONSENT OF A LANDLORD BEFORE REQUIRING ITS TENANTS'
UTILITY SERVICE TO BE BILLED TO THE LANDLORD'S ACCOUNT?
3. SHOULD MUNICIPAL UTILITIES BE ABLE TO REQUIRE A
SECURITY DEPOSIT OF NO MORE THAN THREE TIMES THE
AVERAGE MONTHLY BILL?
PURPOSE
The purpose of this bill is to prohibit a number of
practices by municipal utilities that apartment owners
believe are unfair because they make the landlord
responsible for nonpayment of utility bills by their
tenants.
There are at least two types of municipal utilities:
"municipally owned utilities", which are public utilities
owned by cities (Section 10000 et. seq. of the Public
Utilities Code); and "municipal utility districts" (MUDs),
which are special districts organized for the purpose of
providing utility service (Section 11500 et. seq. of the
Public Utilities Code). There are hundreds of
"municipally-owned utilities" in the state, but there are
only two major MUDs: the East Bay Municipal Utility
District (EBMUD), which provides water and sewer service,
and the Sacramento Municipal Utility District (SMUD), which
provides electrical service.
Expanding prohibition against seeking payment from other
people for previous tenants' nonpayment
Under existing law, both types of municipal utilities, when
they provide water service directly on the account of a
tenant, are prohibited from seeking to recover from a
subsequent tenant any charges which were incurred by a
previous tenant. (Sections 10016 and 12811.5 of the Public
Utilities Code).
This bill would expand this provision to apply to the
provision of all utility services, not just water service,
AB 1770 (Brewer)
Page 3
and clarifies that subsequent tenants can be charged for
previous tenants' non-payment if the subsequent tenant is
an adult who lived with the non-paying previous tenant.
The bill also expands this provision to prohibit property
owners from being charged for nonpayment by previous
tenants.
Requiring tenants' service to be on the account of the
landlord
Existing law authorizes both types of municipal utilities,
when there has been a nonpayment by a previous tenant for
water service, to "require that service to subsequent
tenants be furnished on the account of the landlord or
property owner." (Sections 10016 and 12811.5)
This bill deletes this provision for both types of
utilities and instead prohibits municipal utilities from
requiring that service to subsequent tenants be furnished
on the account of the landlord or property owner unless the
property owner consents through a written agreement.
The bill applies this prohibition to all utility services,
rather than just to water service.
This measure exempts master-metered buildings from its
provisions. As a result, municipal utilities could
continue to require landlords in master-metered buildings
to be billed directly.
Changing the ability to require deposits
Existing law provides that the decision of both types of
municipal utilities to require a new residential applicant
to deposit a sum of money prior to establishing an account
"shall be based solely upon the credit worthiness of the
applicant as determined by the public utility." (Sections
10009.6 and 12822.6).
This bill retains this provision requiring deposits to be
based upon credit worthiness, but it prohibits both types
of municipal utilities from demanding or receiving security
in an amount that exceeds two billing cycles of service
charges, or three times the average monthly bill.
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COMMENT
1. Seeking payment from other people for previous tenants'
nonpayment
There does not appear to be any opposition to
prohibiting utilities from trying to make another
person pay for service rendered to a previous tenant,
whether that other person is a subsequent tenant or a
landlord, and whether the bill was for water or another
utility service. The municipal utilities which are
otherwise opposed to this bill state that they are
unaware of any utility which is engaged in this
practice.
The only concern about this provision from utilities
related to persons who claim that they should not be
held responsible for non-payment by their previous
roommate. AB 1785 was amended in this committee last
year to address this problem by providing that a
"subsequent tenant" shall not include any adult person
who lived at the residence during the period that the
charges or penalties accrued.
2. Requiring tenants' service to be on the account of the
landlord
a) Framing the issue
This provision is based upon the premise that
the fairest and cleanest way to enforce nonpayment
of utility bills is to terminate the service of the
non-paying customer. If tenants are billed
directly for their own utility service, it is not
unfair to terminate their service if they are
delinquent in their payment. The ability to
terminate the service of the non-paying party
obviates the need to use liens on the property to
secure payment, which landlords believe unfairly
holds them responsible for tenants'
irresponsibility.
Tenants' groups do not oppose this provision,
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because of the limitation on the amount of deposits
discussed in the next comment. However, municipal
utilities are strenuously opposed to the provision.
The utilities want to avoid the political and
legal problems associated with terminating basic
utility service. They greatly prefer to enforce
delinquent accounts through pursuing the more
solvent landlord, even if they cannot secure their
debt with a lien.
Municipal utilities also point out that the
only explicit authority in existing law for
utilities to require service to be billed on the
account of a landlord for usage by a tenant is for
water service to a property at which there is a
history of prior nonpayment by tenants. (Sections
10016 and 12811.5 of the Public Utilities Code).
They believe that this is an appropriately limited
power to protect their interests.
b) Who is in a better position to influence
tenant?
The East Bay Municipal Utilities District
argues that property owners are in a better
position than utilities to ensure that the tenant
pays its utility bill:
"We do not believe it is unfair to the
landlord to hold that person responsible for
services rendered to his or her property.
Clearly, the landlord is in a far better
position to exercise control and influence
over the tenant's actions by simply
including the amounts owed for utility
service within the rent owed to the
landlord."
In response, the Southern California Apartment
Association believes that the opposite is the case:
"... an owner has no control over a
resident's motivation to meet his or her
financial obligations. Municipalities have
as much or more power than a property owner
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to force the payment of an outstanding
debt."
c) Since the property owner benefits from service
to the property, is it fair to make a property
owner pay the tenant's bill?
Best, Best and Krieger, writing on behalf of a
number of its water and irrigation district
clients, argues that it is better to charge the
landlord for service rendered to its property than
to raise rates for all other users:
"If the tenant runs up a high water bill
irrigating the property owned by the
landlord, and then suddenly vacates the
property without paying the bill, who would
be more equitably responsible for the cost of
the water that was delivered: the owner
whose property benefited from the irrigation
water, or the other customers who will have
to absorb the cost if the property owner is
not required to pay?o
In response, the California Apartment
Association (CAA) argues that property owners have
already been assessed for the benefit of having
utility service provided to their property:
"Utilities are a
community/service/benefit. Benefit is
assessed twice. Initially as a property is
developed, the developer pays an extension
fee to extend utility lines to the
development and a connection fee when a
building permit is pulled for the unit.
These costs are passed on to the property
owner when the property is purchased. By
requiring property owners to pay for tenant
service charges, the property is paying for
the benefit of connecting and using utilities
three and four times over."
d) Should municipal utilities be treated like
privately-owned utilities?
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CAA argues that utilities should be held
accountable as businesses:
"Efficient management of utility
receivables after the first billing cycle
should reveal account delinquencies that the
utility can act on prior to service charges
exceeding the amount of the security deposit.
Other efficient business practices such as
credit checking systems and uncollectables
accounting can also be used to manage
uncollectable debt without relying on
uninvolved third parties, such as property
owners."
In response, municipal utilities point out that
they are not the same as businesses because they
cannot refuse to serve a particular customer, and
because termination of service is often not a
politically feasible remedy for them to pursue when
a bill is not paid. In some cases, termination is
not even legal because local public health officers
prohibit water service from being terminated.
Municipal utilities also argue that this bill
will in fact create an unfair situation where
municipally-owned utilities are treated differently
than privately-owned utilities. Under Section 2714
of the Public Utilities Code, privately-owned
utilities are guaranteed the ability to place an
account in a landlord's name if there has been a
history of nonpayment by prior tenants. The League
of Cities argues that it is nonsensical to treat
landlords served by municipally-owned utilities
more favorably than landlords served by
privately-owned utilities.
should the bill be amended to apply its
provisions to privately-owned utilities, too?
3. Changing the ability to require deposits
Tenant organizations were concerned that, if utilities
could not require service to be provided on the account
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Page 8
of the landlord when there has been a history of
nonpayment by previous tenants, that the utility instead
would require overly burdensome deposits from the
subsequent tenants. As a result, this bill was amended
to prohibit utilities from requiring security deposits in
an amount that exceeds two billing cycles, or three
months, of average service charges.
Municipal utilities are opposed to this limitation
because they believe that the utility should be able to
make a case-by-case determination of what deposit amount
is appropriate.
Best, Best and Krieger raises the concern that the
"average" service charge can often be exceeded by
different tenants by three or fourfold by "imprudent
water consumption practices or simple negligence in
leaving faucets running or toilets in a "'stuck'
position." Therefore, the deposit allowed under this
bill may be significantly less than the amount owed by a
delinquent tenant even for one billing cycle.
This problem can be exacerbated if a tenant avails
himself or herself of the provisions of Government Code
Section 6071, which prevents municipal utilities from
terminating service for nonpayment during the pendancy of
an investigation of customer dispute.
Support: California Apartment Association
Opposition: California Municipal Utility Association;
Association of California Water Agencies;
League of California Cities
Prior Legislation: AB 1785 (1995) Vetoed
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